Staggered Boards and the Value of Voting Rights

This paper examines the impact of staggered boards on the value of voting rights (i.e., voting premium) estimated using option prices. We find companies with staggered boards have higher voting premium. Exploiting plausibly exogenous court rulings, we confirm that weakening the effectiveness of staggered boards decreases the voting premium. Given that voting premium reflects private benefits consumption and associated managerial inefficiencies, our findings are consistent with the entrenchment view on staggered boards. Analyzing the cross-sectional heterogeneity in our sample, we find the entrenchment effect of staggered boards to be more pronounced for firms in non-competitive industries and for mature firms